Directors Cases Flashcards
Bushell v Faith
Mr B was a director of Bush Court (Southgate) Ltd, he held one third in total of shares, his sisters owned the remaining two thirds. Art 9 of the Arts of Assoc. stated that any director would have three votes per share in any poll to remove him as director. Mr B was able to defeat his sister’s resolution to remove him as he had 3 votes per share. The sisters challenged Art. 9 on the basis that the CA 1948 ( equivalent to s168(1) CA 2006) provided for a director to be removed by passing an ordinary resolution.
It was held that the HL – decided there was nothing in the CA 1948 to preclude the company from weighting voting rights in the Arts of Assoc. The vote to defeat the resolution for removal could not be set aside and was valid
Towers v Premier Waste Management Ltd
The statutory duties were stated by Mummery L.J - to “extract and express the essence of the rules and principles which they have replaced.”
Hogg v Cramphorn
The directors issued further shares and gave financial assistance for their purchases in an attempt to fight off a takeover bid, believing it to be in the best interests of the company.
It was held that despite having acted in good faith the directors had exceeded their powers so the members had to ratify their actions, which they did
Re City Equitable Fire Insurance Co
The company was in liquidation due to shortage of funds. It was discovered that this was due to the deliberate fraud of the chairman for which he had been convicted. Liquidator brought an action against the other directors on the basis of negligence for leaving the affairs of the company entirely in the hands of the chairman.
It was held that the liquidator failed and the judge set out the duty of care expected from a director
Dorchester Finance Co v Stebbing
The company was a money lending company and had three directors Parsons, Hamilton and Stebbing, all with considerable accountancy and business experience. No board meetings were held, two of the directors left all the affairs of the company to Stebbing. Parsons and Hamilton did sign blank cheques from time to time on the company’s account. Stebbing loaned the company’s money without complying with statutory regulations such that the loans were unenforceable.
It was held that all three were liable in negligence. If a director has a special skill eg accountancy, he is expected to use it to benefit the company
IDC v Cooley
Cooley was the MD of IDC and had been negotiating a contract on behalf of the company. The third party wanted to award the contract to him personally so without disclosing the reason to the company ( it’s board) he resigned in order to accept the contract personally.
It was held that he was in breach of his fiduciary duty as he had profited personally by use of an opportunity which came to him through his directorship. It made no difference that the company would not have won the contract. He was accountable to the company for the benefits gained from the contract
Aberdeen Railway v Blaikie
A company bought some chairs from a firm. At the time of the contract one of the directors, unknown to the company, was a partner in the firm.
It was held that the company could avoid the contract because of this undisclosed interest in the transaction, without penalty
Percival v Wright
The director of a company bought shares from a member at a price less than that for which the director knew that a third party had expressed interest in buying all the shares in the company. The third party interest came to nothing but the selling member sued the director for breach of duty in not disclosing the interest expressed by the third party.
It was held that the purchasing director was under no obligation to disclose to the selling member the third party interest. A director’s duties are owed to the company and not to individual members
Shaw v John Shaw
The company’s board of directors resolved that the company would commence litigation against two errant directors. At a subsequent members meeting an ordinary resolution was passed that the litigation be discontinued.
It was held that it was for the board to decide and so the ordinary resolution had no effect
